The Faroese Parliament passes fisheries reform

On 13 December 2017, the Faroese Parliament passed a bill that represents a major reform of national fisheries management in the Faroe Islands. The Act on the Management of Marine Resources, which came into effect on 18 of December 2017, has been one of the current coalition Government’s main objectives since taking office in 2015.

– Mr Høgni Hoydal, Minister of Fisheries explains: “Forty years have passed since the Faroese fishery zone was extended to 200 nautical miles and the Faroese people gained control of the marine resources in their waters. Furthermore, exactly ten years ago the Faroese Parliament decided to terminate all fishing licenses as of 1 January 2018, instigating the need to introduce a new system by 2018.” Mr Hoydal adds: “The reform is an historic milestone, marking a new era in the sustainable management of Faroese fisheries.”

Principles of the reform
According to the reform, all living marine resources in Faroese waters are the property of the people of the Faroe Islands, and as such, fishing licences may never become private property, neither by law nor practice. Furthermore, fishing licences cannot be traded directly between private buyers. To change hands, licenses must go through a public auction.

All fisheries must be biologically, economically and socially sustainable, with the reform built on three main pillars:

Sustainable fishing and conservation of fish stocks.

Rights and access to fishing licences.

Industry requirements and value-adding.

Sustainable fishing and maintenance of fish stocks
The Act on Management of Marine Resources states that a long-term strategy for the management and utilization of marine resources is to be designed and implemented for each stock in order to maintain the industry and the fish stocks at sustainable levels. The strategy should take into account the recommendations of experts in the field.

As of 2019, the Faroese fleet of longliners and trawlers catching demersal fish in Faroese waters will no longer be allocated fishing days based on the previous days-at-sea system, which will be replaced by a quota system.Small fishing vessels which conduct coastal fisheries on a smaller scale will, however, continue to base their activity on annually allocated fishing days.

Rights and access to fishing licences
A new element in the fisheries legislation is the implementation of open public quota auctions. 15% of the overall quotas for mackerel and herring and 25% of the overall quotas for blue whiting will be publically auctioned, as will 15% of the overall Faroese quota for demersal fisheries in other (non-Faroese) waters. Additionally, quotas for these species, which exceed certain quota levels in the future, will be auctioned off entirely.

For demersal fisheries in Faroese waters, quotas will only be actioned off when the overall catch by Faroese vessels exceeds 20,000 tons for cod, 12,000 tons for haddock and 40,000 tons for saithe, which is higher than current expected quotas.

Other quotas can also be auctioned off if there are increases in quota levels or if new fish stocks appear.

The above-mentioned rights will be sold as short-term or long-term licences, and buyers are obligated to use them. Any rights that go unused will revert to the Government.

All present actors in the industry will have access to the remaining quota, but they will be required to pay a resource ate in accordance with profits in the industry in preceding years. While the initial licences will be valid for eight years, the Parliament will assess annually how long future licences will be valid, with a minimum period of 8 years.

Rules regarding concentration of access to fishing rights will be implemented. Antitrust limits for collective Faroese fishing licences are set at 20% and for the three main fisheries – pelagic, local demersal, foreign demersal – the antitrust limit is set at 35%.These rules are not retrospective and do not include auctioned licences that are valid for a year or less.

To improve access to the fishing industry the new Act operates with company-owned rights and not a limited number of vessel-owned rights, as in the old Act. This implies that anyone can get a fishing right from the Government if one can get a vessel approved for fishing in Faroese waters.

Up to 8.5% of the total quotas for all types of fish can be allocated as development quotas and will be part of development plans for the industry, across the islands. Development quotas will be used to support projects which promote adding value to marine resources, particularly in areas that currently have limited access to marine resources and where unemployment rates tend to be higher than average. Development quotas will be distributed after a public call for applications, prior to which specific requirements for eligibility and priority will be given to projects and campaigns that support development, value-adding and job opportunities.

Industry requirements and value-adding
Fishing licences may only be granted to Faroese-owned operators. In order to take part in Faroese fisheries, the company or individual must be registered and pay taxes in the Faroe Islands, as well as pay their crew in accordance with Faroese labour market rules and agreements.

A six-year period for the phasing out of foreign ownership will be implemented. Special rules apply for Icelandic ownership with a seven-year plan. These rules do not apply to investments in fishing production companies.

To add more value in the industry, all fish caught should be landed in the Faroe Islands, and eventually vessels will be required to land all parts of the fish, including head, back, liver, guts and other bi-products. The industry will be given time to adjust to these changes. Finally, at least 25% of fish caught will be sold at approved auctions, with the exception of fish caught under licences bought at public auctions.

Annual ReviewThe new legislation also provides for an annula review. The Minister of Fisheries will present a report to Parliament detailing changes in the industry and other relevant factors as background in assessing the need for any revisions.

In addition to the provisions of this Act regarding the management of marine resources, the Ministry of Fisheries will propose changes to other laws, including to ensure that taxation and profits from the fisheries sector remain in the Faroe Islands and to eliminate “transfer-pricing”, amongst other matters.